Audit Us, All of Us

“Oregon is a hotbed of auditing,” says Michael Eglinski, a performance auditor from Kansas. But Eugene, Oregon’s second-largest city, doesn’t have a performance auditor. For years, Eugeneans have tried to evaluate whether the city is big enough, and its operations complex enough, to warrant a performance auditor.

After using reserves to plug a $5 million shortfall in its General Fund, the city scheduled a series of Budget Committee meetings to allow a slower, more in-depth process for fiscal year 2015’s budget. The city assembled the Financial Investigative Team (FIT), a citizens committee that looked into aspects of the budget.

FIT committee member Ruth Duemler says the experience raised a lot of questions — about retirement costs, overtime costs, management-to-employee ratios, police deployments, the extent of tax breaks, the best ways to predict tax revenue — that a performance auditor could best answer. “The whole study was too short, and I don’t know that our committee was valuable,” she says, adding that in one instance, the information for a meeting was sent to FIT members the evening before their meeting.

Performance auditors study how governments provide programs and services and make recommendations to improve that performance, save money or avoid trouble in the first place. Portland is the only Oregon city that has an independent performance auditor. The office recently made headlines when it reported “alarming lapses” in the Portland Police Bureau’s accountability.

Eglinski is the performance auditor in Lawrence, Kan., a city with about 90,000 people, around 68,000 fewer than Eugene. Lawrence’s city council created the performance auditor office as a good governance measure, not as a response to a scandal or waste, in 2008. “Probably the majority of communities our size don’t have audit functions, but places are adding, not subtracting, audit functions,” Eglinski says.

Eglinski writes about six reports a year, some large and some small, including an overall financial analysis that he compares to going to the doctor for a check-up. “Because I am independent of the city manager, I can view it a little bit differently,” he says. “I don’t have any stake in the numbers the way management does.”

Determining whether an auditor pencils out financially is difficult, Eglinski says. “Sometimes you save money by making it harder for problems to happen that are not going to show up in the bottom line as easily.”

One example of this took place in Berkeley (population about 112,000), where performance auditor Ann-Marie Hogan’s report on future pension costs may have prevented mistakes in planning. “They weren’t really understanding what the future costs would be” before her report, she says. Some critics blame Oregon’s Public Employee Retirement System (PERS) for Eugene’s budget shortfall.

Hogan says performance auditors do more than save money. “The public really trusts auditors more than they trust other elected officials or managers,” she says. Knowing that an auditor worked on a project will “increase public faith and trust in the government.”

While citizen involvement in FIT, on the Budget Committee and at public meetings is high, performance auditors don’t mean a less-involved public, Hogan says. “You also have to be very skilled at taking complex situations and explaining them in a way that really busy people who don’t want to spend their whole lives delving into this can understand.” She adds, “It’s very important to have citizen input, but it’s also very important to have an entity in your city that is independent of management, independent of labor and who has the skills to do the work.”

For a decade, former Portland budget auditor Gary Blackmer studied topics such as the city’s infrastructure maintenance, police deployments, permit costs and more. “Eugene’s probably right on the line in terms of whether a performance auditor could be useful on an ongoing basis,” he says. If a city’s too small, the cost of the auditor’s office can diminish or even cancel the savings from audits. “On the other hand,” he says, “if the city really is inefficient or if it is large enough to sustain an auditor, it can get some real benefits from the audit.”

Blackmer stresses that performance auditors need to be independent, usually selected by a city council and not the city manager. He says hiring consultants instead of an in-house independent auditor can lead to problems. “There is an advantage in that they bring some expertise,” he says, “but the disadvantage is that if they’re hired by an agency to tell them how good of a job they’re doing, it may not be an honest and objective answer.”

Mayor Kitty Piercy says she’s interested in a performance auditor but doesn’t think hiring one would be feasible in time for creating a budget for the upcoming fiscal year, which begins July 1, 2014. “The council and Budget Committee have indicated confidence in staff,” Piercy says, “but I always think an outside look can be helpful and useful in looking at how the departments in the city are run, and new suggestions could surface, or the current way we’re doing things could be validated.”